FOUNDATIONS OF FINANCE- MYFINANCELAB
10th Edition
ISBN: 9780135160572
Author: KEOWN
Publisher: PEARSON
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Chapter 6, Problem 23SP
(Portfolio beta and security market line) You own a portfolio consisting of the stocks below:
The risk-free rate is 3 percent. Also, the expected return on the market portfolio is 11 percent.
- a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stocks’ expected returns, where the weights are the percentage invested in each stock.)
- b. Calculate the portfolio beta.
- c. Given the foregoing information, plot the security market line on paper. Plot the stocks from your portfolio on your graph.
- d. From your plot in part (c), which stocks appear to be your winners and which ones appear to be your losers?
- e. Why should you consider your conclusion in part (d) to be less than certain?
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Chapter 6 Solutions
FOUNDATIONS OF FINANCE- MYFINANCELAB
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